Citigroup Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Citigroup for today is based on a combination of the following eight different indices:
| M | = | -4.84 | + | 0.92 * DSRI | + | 0.528 * GMI | + | 0.404 * AQI | + | 0.892 * SGI | + | 0.115 * DEPI |
| = | -4.84 | + | 0.92 * 0.8585 | + | 0.528 * 1 | + | 0.404 * 1 | + | 0.892 * 1.0857 | + | 0.115 * 1.076 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9159 | + | 4.679 * 0.031342 | - | 0.327 * 0.9797 |
| = | -2.36 |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
| This Year (Mar25) TTM: | Last Year (Mar24) TTM: |
Total Receivables was 円8,561,869 Mil.
Revenue was 3219793.228 + 3012606.882 + 2896962.816 + 3179931.827 = 円12,309,295 Mil.
Gross Profit was 3219793.228 + 3012606.882 + 2896962.816 + 3179931.827 = 円12,309,295 Mil.
Total Current Assets was 円0 Mil.
Total Assets was 円383,303,706 Mil.
Property, Plant and Equipment(Net PPE) was 円4,593,061 Mil.
Depreciation, Depletion and Amortization(DDA) was 円641,584 Mil.
Selling, General, & Admin. Expense(SGA) was 円4,457,632 Mil.
Total Current Liabilities was 円0 Mil.
Long-Term Debt & Capital Lease Obligation was 円44,073,948 Mil.
Net Income was 605770.088 + 439293.641 + 462885.053 + 507835.618 = 円2,015,784 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = 円0 Mil.
Cash Flow from Operations was -8750873.608 + 3813979.385 + -2383615.001 + -2677305.589 = 円-9,997,815 Mil.
|
Total Receivables was 円9,185,978 Mil.
Revenue was 3160273.525 + 2511037.37 + 2918312.459 + 2748001.479 = 円11,337,625 Mil.
Gross Profit was 3160273.525 + 2511037.37 + 2918312.459 + 2748001.479 = 円11,337,625 Mil.
Total Current Assets was 円0 Mil.
Total Assets was 円364,435,240 Mil.
Property, Plant and Equipment(Net PPE) was 円4,372,905 Mil.
Depreciation, Depletion and Amortization(DDA) was 円664,319 Mil.
Selling, General, & Admin. Expense(SGA) was 円4,482,941 Mil.
Total Current Liabilities was 円0 Mil.
Long-Term Debt & Capital Lease Obligation was 円42,772,461 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Total Receivables in year t to year t-1.
A large increase in DSR could be indicative of revenue inflation.
| DSRI | = | (Receivables_t / Revenue_t) | / | (Receivables_t-1 / Revenue_t-1) |
| = | (8561868.571 / 12309294.753) | / | (9185977.572 / 11337624.833) |
| = | 0.695561 | / | 0.810221 |
| | = | 0.8585 |
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
| GMI | = | GrossMargin_t-1 | / | GrossMargin_t |
| = | (GrossProfit_t-1 / Revenue_t-1) | / | (GrossProfit_t / Revenue_t) |
| = | (11337624.833 / 11337624.833) | / | (12309294.753 / 12309294.753) |
| = | 1 | / | 1 |
| | = | 1 |
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (0 + 4593060.901) / 383303706.396) | / | (1 - (0 + 4372905.264) / 364435239.989) |
| = | 0.988017 | / | 0.988001 |
| | = | 1 |
4. SGI = Sales Growth Index
Ratio of Revenue in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
| SGI | = | Sales_t | / | Sales_t-1 |
| = | Revenue_t | / | Revenue_t-1 |
| = | 12309294.753 | / | 11337624.833 |
| | = | 1.0857 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
| DEPI | = | (Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) | / | (Depreciation_t / (Depreciaton_t + PPE_t)) |
| = | (664318.911 / (664318.911 + 4372905.264)) | / | (641584.385 / (641584.385 + 4593060.901)) |
| = | 0.131882 | / | 0.122565 |
| | = | 1.076 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
| SGAI | = | (SGA_t / Sales_t) | / | (SGA_t-1 /Sales_t-1) |
| = | (4457631.773 / 12309294.753) | / | (4482941.243 / 11337624.833) |
| = | 0.362135 | / | 0.395404 |
| | = | 0.9159 |
7. LVGI = Leverage Index
The ratio of total debt to Total Assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((44073947.535 + 0) / 383303706.396) | / | ((42772460.89 + 0) / 364435239.989) |
| = | 0.114984 | / | 0.117366 |
| | = | 0.9797 |
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
| TATA | = | (IncomefromContinuingOperations_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (NetIncome_t - NonOperatingIncome_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (2015784.4 - 0 | - | -9997814.813) | / | 383303706.396 |
| | = | 0.031342 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Citigroup has a M-score of -2.36 suggests that the company is unlikely to be a manipulator.
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